This paper compares wages and non wage benefits earned by Vietnamese public employeesto earnings in the (mostly informal) the private sector from 1993 to 2006. We document thefact that the advantage of public sector workers didn't decrease, but rose considerably after thetransition to market economy. To explain this rather counterintuitive finding we use a simple,yet innovative method to decompose public private sector earnings differences. We distinguishbetween the effect of changes in workers characteristics and that of changes in returns to thesecharacteristics in the two sectors. Panel data techniques allow us to take into account the effectof unobserved workers characteristics along with observable ones. We argue that selection isimportant to explain public private differences but does not explain the observed increase in thepublic wage premium ; rather change in the returns to skills is the driving factor. We interpretthese findings as a consequence of the twofold choice made by the Vietnamese government topromote public entreprises and services as a motor for Vietnam's industrial development andto favor the interests of public employees whose economic status was threatened by the reformprocess.